Operating performance

Power generation in 2019 stood at 58.3 TWh, down 12% on the previous year. The level of power generation at PGE Group was mainly affected by lower generation from lignite-fired power plants (decrease by 6.8 TWh) and hard coal-fired power plants (decrease by 1.8 TWh). This is primarily the result of lower work load and longer stand-by of units in reserve due to increased imports of energy, higher production of electricity from wind and lower demand of the National Power System. The 20% year-on-year increase in wind farm generation is attributable to higher windiness in 2019. In addition, energy generation from biomass and pumped-storage plants increased (by 13% and 67% respectively).

The green direction is achievable taking into consideration a conventional baseload that will allow balancing the growing number of renewable sources and will provide our economy and society with stable electricity and heat supplies – says Wojciech Dąbrowski, President of the Management Board of PGE Polska Grupa Energetyczna.

In 2019, the volume of heat sold by PGE Group stood at 50.3 PJ, down by 0.8 PJ on 2018, mainly due to lower demand for heat caused by higher average temperatures in 2019.

Electricity distribution stood at 36.4 TWh and was relatively flat as compared to 2018.

In 2019, PGE Group posted a 3% increase in electricity sales. Part of this increase is attributable to PGE's supply of electricity to customers whose suppliers have gone bankrupt. In addition, the absence of an active sales market translated into a lower migration of customers between trading companies.

Financial performance

In 2019, PGE Group reported EBITDA of about PLN 7.1 billion, up 12% year-on-year, mainly as a result of additional CO2 emission allowances (EUA) worth PLN 1.4 billion, granted in H1 2019.

Conventional Generation and Distribution segments were the largest contributors to the Group's performance in 2019, accounting for, respectively, 40% and 32% of PGE Group’s EBITDA. District Heating accounts for 17% of EBITDA, Renewables for 7% of EBITDA and Supply for 4% of EBITDA.

EBITDA posted by the Conventional Generation segment reached PLN 2.9 billion, having increased by 37% year-on-year, driven mainly by the allocation of CO2 emission allowances and increased margin on electricity sales. EBITDA in the Distribution segment declined by 6% year-on-year to PLN 2.3 billion, primarily due to higher operating expenses. The District Heating segment's EBITDA grew by 39% to PLN 1.2 billion on the back of higher prices of electricity sold by CHP plants. EBITDA earned by the Renewables segment increased by 12% year-on-year to PLN 517 million, driven by increased sales of electricity and property rights. The Supply segment’s EBITDA increased by 23% year-on-year to PLN 280 million.

The results of impairment testing of property, plant and equipment carried out by PGE showed an impairment of the carrying amount of selected property, plant and equipment in the Conventional Generation segment in the amount of about PLN 7.5 billion. Impairment losses were recognised primarily for the Bełchatów and Turów Complexes. At the same time, there were premises for reversal of the impairment losses in the Renewables segment in the amount of approx. PLN 400 million. These were non-cash events that reduced the PGE Group's net profit for 2019 by approximately PLN 5.8 billion. The Group's net result, including impairment losses, stood at PLN -3.9 billion. Adjusted for impairment losses, net profit reached PLN 2.1 billion, i.e. 17% more than in the previous year.

The results of impairment tests indicate how the power industry itself is evolving as a result of changes in the business environment and the scale of challenges faced by the PGE Group. Maintaining the Group's financial position requires strong cost discipline and focusing on investment projects with the strongest rate of return – says Paweł Strączyński, Vice-President for finance of PGE Polska Grupa Energetyczna.

Investments at PGE Group

In 2019, PGE Group's capital expenditure increased by 2% year-on-year to PLN 7 billion.

In 2019, new conventional units, 5 and 6, were commissioned at the Opole Power Plant. In line with the current timetable, the Turow project is to be completed before the end of this year. Owing to high generation parameters and significantly lower carbon emissions compared to older units, new conventional units operating in baseload will replace less efficient coal-fired units in the power system.

Construction of onshore wind farms with a total capacity of over 97 MW is currently being finalised. The project, scheduled to be completed in Q2 2020, will increase the installed capacity of PGE's wind farms by 18% to 647 MW, strengthening the Group's leadership on RES market.

Simultaneously, an offshore wind farm development project is underway. PGE Group plans to reach 2.5 GW by 2030. 2019 also marks the launch of PGE Group's PV Programme, providing for the construction of photovoltaic facilities with a total capacity of 2.5 GW by 2030 on the Group's own land and on sites of its business partners. In 2019, an investment decision was also taken to build new gas-fired capacity in Dolna Odra Power Plant. Two 1400 MW CCGT units will ensure continuity of supply in the base and provide balancing support for the planned offshore wind farms in the Baltic Sea and onshore wind farms.

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